Fleet outsourcing: frequently asked questions

October 31, 2014 Fleet Management

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Successful companies see outsourced partnerships as a way to achieve growth without investing valuable capital or management attention in areas that are non-core competencies.

Fleet outsourcing, or dedicated transportation, is a growing trend for North American companies. This FAQ document explains some key points on how fleet outsourcing works.

Q: What is fleet outsourcing?

A: Fleet outsourcing is a business model that provides companies with 100% dedicated trucks and drivers from a 3rd party transportation provider. It gives firms all of the control and high-touch customer service of their own dedicated fleet of trucks and drivers, without the cost, hassle, and distraction of running their own fleet. Fleet outsourcing providers such as Canada Cartage acquire the equipment, hire and manage drivers, and are responsible for all areas of fleet management including maintenance, licensing, insurance, regulatory compliance, fuel, and more. Outsourced fleets can even be branded with the customer’s logo and colours, and drivers outfitted with the customer’s uniforms.

Q: What kind of companies use fleet outsourcing, and why?

A: Fleet outsourcing is used by small, mid-size, and large companies. They typically use fleet outsourcing to meet some, or all, of the following requirements:
• “final mile” delivery from their Distribution Center (DC) or manufacturing plant to a retail store or end-customer site, usually within a 200-kilometer radius
• high degree of customer interaction that requires a dedicated driver who gets to know the route and the customers
• want to decrease a distraction that is a non-core capability
• want to decrease the significant risk and liability of running trucks down busy highways and through urban centres
• want to better manage volume peaks and valleys, and right-size equipment and drivers to meet these fluctuations

Q: What happens to my existing equipment when I start working with your company?

A: Every Canada Cartage customer receives a customized solution to meet their current and future needs. We provide several options for customers evaluating their equipment ownership:
1. Customers can choose to sell their equipment at fair market value to Canada Cartage and we will continue to operate it on their account.
2. If we determine that there is excess equipment, or the equipment is old, Canada Cartage will arrange to sell some or all of the existing equipment at fair market value. Where necessary, we will purchase up-to-date equipment that better suits current demands of operation.
3. If we determine there is excess equipment, Canada Cartage will offer to absorb tractors and trailers into our own general fleet. As part of our approach to fleet “right-sizing”, this relieves our customers of the costs associated with owning too much equipment.

Q: What happens to my drivers?

A: Reliable, experienced drivers are highly valuable to any company. That’s why Canada Cartage provides solutions for managing your resources during the transition to an outsourced model. Here are just a few of the options we offer:
1. Subject to meeting our employment standards and suitability, we will hire your drivers and they will continue to work exclusively on your account. You have the right to “hand pick” which of your existing drivers will work on your account.
2. For those drivers who do not fit into the above, we will consider hiring them, subject to meeting our employment standards and suitability, but they will work on other Canada Cartage accounts.
3. Drivers who do not fit into one of the two categories above will be terminated as part of the transition process. Any severance owing is the responsibility of the original employer.

Q: Where is the equipment domiciled?

A: Canada Cartage works closely with each customer account to determine the most cost-effective and logical place to domicile and dispatch your trucks. In some cases, our drivers and trucks start and stop their day from your facility. In other cases, your dedicated fleet will be positioned at one of our company terminals. Many customers choose a combination of the two; all options are presented and determined based on what makes the most sense for the customer from a cost and logistics perspective.

Q: Who controls the schedule of the drivers?

A: Our customers have full control over their drivers’ schedule. Some customers choose to continue to manage routing and dispatching of drivers, while others prefer to let us manage it for them. We offer complete route optimization, dispatch, and on-line tracking solutions for both tractors and trailers.

Q: How is the equipment branded?

A: Customers are given the option to outfit their fleet, equipment, and drivers with their own corporate branding, or to operate their fleet under the Canada Cartage brand. There are pros and cons to both options. Some customers enjoy the benefits of using their fleet to promote their business, increasing brand identity on the road. However, customers with high-value freight often prefer not to advertise the contents of their fleet. We leave the choice to you.

Q: How are decisions made on replacing equipment?

A: Each customer’s equipment strategy is determined with short-, mid- and long-term goals in mind. Our right-sizing approach takes into account the lifespan of the equipment, current industry demands, safety standards, and the projections for capacity in the future. We bring our experience and make recommendations, but ultimately the plan for equipment replacement and maintenance is a joint decision with our customers.

Q: Isn’t it more expensive to outsource, since Canada Cartage needs to make a profit as well?

A: When assessing the costs and benefits of fleet outsourcing, the first step is for companies to understand the TCO or “total cost of ownership” of their fleet. The TCO is made up of both direct costs (lease, fuel, labour, maintenance, insurance, licensing) and indirect costs (recruiting, hiring, training, driver oversight, regulatory compliance, safety, workman’s compensation filings, management distraction, diversion of capital away from growth, financial risk and liability, etc.). The majority of fleet operators have a good understanding of their direct costs. But estimating indirect costs is more challenging. Canada Cartage provides complete visibility to the fleet TCO in our pricing, giving customers 100% confidence in their costs and more certainty in their fleet spend going forward. Once companies understand their TCO, the Canada Cartage value proposition, and our tools to reduce overall fleet spend, makes a compelling business case for fleet operators.

We encourage you to contact Canada Cartage to discover the added benefits and cost-savings we can offer your business. Call us at 1.800.268.2228

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